IYR Is in a Bad Spot; Short It

Take advantage of a quick downturn in commercial real estate

From the transports to steel to chips, the list of “who’s gone down the most since ‘QE Infinity’ was announced” keeps growing, but commercial real estate has especially taken a beating and has been one of the worst performing sub-sectors.

While QE3 should have been a boost for commercial real estate, the opposite has been true.

In this case, that remains good for us at Trending123 as our short in the Dow Jones U.S. Commercial Real Estate ETF (NYSE:IYR) is now hitting new multi-month lows. The ETF has erased any gains it made in the third quarter after falling victim to institutional distribution.

Click to Enlarge Furthermore, IYR is trading at levels it hasn’t seen since July and now resides in a gap area. It wouldn’t surprise me to see IYR drop back down this week to fill that gap in the $63 range, which could mean a quick buck for bear-side traders who establish short positions at current levels.

If IYR revisits that gap, the next stop is a retest of the 200-day EMA. Will it hold? I don’t think so, especially given all of the distribution the stock has seen, but I don’t think we’ll have to wait long for the answer.

Currently, we’re short IYR in Trending123andlooking for a broader move down to my ultimate $56 target.

But for those of you with a margin account who are looking for a short-term trade, you might consider trying to capture the quick move from current levels near $64.40 down to the $63 area, and then onto the $61.45 level (the purple line in the chart above).